In June, across the nation, students put on their robes, walked head-high to the sound of Pomp and Circumstance, and took pictures with proud parents. A celebratory party or barbeque probably followed the event. And, if you were one of the lucky few, your parents might have even gifted you a car.
Today, the Federal government has a gift of its own for students and parents: the interest rates on new subsidized loans doubles from 3.4 to 6.8 percent. Thank you, FED.
As tuition costs have skyrocketed in the last 20 years, so has the cost of borrowing. Many students have worked hard to get into their dream schools, and their parents, even harder at saving what they could to help pay for that dream. Unfortunately, it isn’t enough. They will also have to borrow what they need to close the gap. Instead of the federal government rewarding their efforts, they are adding to their burden.
Currently, there is $1 trillion in outstanding student loan debts in America. That’s more than the nation’s combined credit card balance. Most of the borrowers are struggling to stay afloat, let alone begin to pay those loans back.
In 2013, the excitement of heading off to college is shadowed by the financial burden of the student debt crisis. Many teens are even opting out of college, and instead, headed straight for the workforce to perform menial jobs. What’s the point of going to college when you graduate with a debt the size of a mortgage that you may never be able to pay back due to a grim employment outlook? THIS is the real national security problem. How are we as a country going to compete on the global stage when we don’t have an educated citizenry that can contend with other economies?
The excuse that we can’t afford low interest rates for students is nonsense. The federal government offers far lower rates on loans every single day — they just don’t do it for everyone. A bank can get a loan through the Federal Reserve at the discount rate of less than one percent. The same big banks that destroyed millions of jobs and sent our economy down the toilet in 2008 can borrow at about 0.75 percent, while our students will start paying NINE TIMES as much starting today.
Last month the Congressional Budget Office announced that the government will make $51 billion on the student loans it issued this year — more than the annual profit of any Fortune 500 company. Yes, loaning out money to students is BIG business in Washington. It is why they made student loans un-erasable in bankruptcy proceedings, there is too much money to be made.
Senator Elizabeth Warren has proposed a bill, her first as a senator, that would tie students’ Stafford loans interest rates to the rates banks receive from the Federal Reserve, lowering the rate from 6.8 percent to .75 percent. Unfortunately, the bill has yet to come up for a vote, and Congress just went on vacation for the next four weeks.
Danielle DeAbreu
Danielle DeAbreu is a former model and student at William Paterson University studying Broadcast Journalism with a minor in Political Science.
Follow me on Twitter @DaniDeAbreu13
